Mongolia - Consolidating the Gains, Managing Booms and Busts, and Moving to Better Service Delivery : A Public Expenditure and Financial Management Review - Annexes
Mongolia's external economic outlook is dramatically changing as it faces sharp reductions in the copper price, caused by the financial crisis and global downturn. This compels the government now to drastically cut spending to prudently manage...
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| Format: | Integrated Fiduciary Assessment |
| Language: | English |
| Published: |
World Bank
2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000333037_20090208230450 http://hdl.handle.net/10986/3018 |
| Summary: | Mongolia's external economic
outlook is dramatically changing as it faces sharp
reductions in the copper price, caused by the financial
crisis and global downturn. This compels the government now
to drastically cut spending to prudently manage the budget.
The budget is extremely dependent on mining revenues.
Government is taking the right step in proposing a balanced
budget for 2009. But further adjustments will be needed
given the continuing fall in copper prices. A prudent fiscal
stance will also be needed to manage inflation, which
accelerated in the past year to over 30 percent. The current
situation highlights the need to manage mining revenues
better than in recent years. Mongolia saved little during
the boom years, but instead dramatically increased
expenditures on wages and salaries, and poorly-targeted
social transfers. Adopting a multi-year fiscal
framework-which enforces saving during the boom years, sets
limits to expenditure growth and debt, and ensures
transparency to the public-can help. Since much of the past
windfall revenues have been spent, the country enters the
down-turn with little savings and high inflation, forcing it
to cut expenditures with every drop in the copper price. To
avoid such situations in the future, the government has the
opportunity to adopt a transparent, multi-year budget
framework for expenditures and investment. This includes
adopting a new fiscal responsibility law. It will ensure
that the government saves during the 'boom' years,
so that it can continue to spend during the 'bust'
years. It will also set limits to expenditure growth and
public debt. Within the limits set by this framework,
parliament can then exercise its constitutional rights to
amend the budget. |
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